Hardform Mold Shop Inc. is a company specialized in designing and building molds for the automotive and aircraft industries. The account balances in the company’s general ledger on January 1, 2020 (first day of the annual fiscal year) were as follows (all account balances are in their normal position): Cash $ 3,700 Accounts receivable 5,900 Supplies inventory 29,300 Land 168,500 Buildings 116,500 Accumulated depreciation, buildings 37,500 Equipment 58,500 Accumulated depreciation, equipment 18,000 Accounts payable 25,200 Income tax payable 16,600 Interest payable 4,200 Wages payable (due in 2020) 15,700 Notes payable ($10,000 due June 30, 2021, balance due June 30, 2022) 61,500 Common shares 151,500 Retained earnings, Dec. 31, 2019 52,200 Transactions during 2020: a. The company provided mold design services, all on credit, for $210,300. In addition, the company manufactured molds for customers for $62,300 cash. b. Accounts receivable of $15,600 remain to be collected at December 31, 2020. c. Inventory of $62,900 was purchased on credit and debited to the supplies inventory account. d. Minor parts were purchased for $7,400 cash and debited to the supplies inventory account. e. Wages payable at the beginning of 2020 were paid early in 2020. Wages were earned by employees and paid during 2020 in the amount of $112,000. f. Income tax payable at the beginning of 2020 were paid early in 2020. g. Payments of $73,000 were made to creditors for supplies previously purchased on credit. h. One year’s interest at 9% was paid on the notes payable at July 1, 2020. i. During 2020, James Wilkinson, the principal shareholder, purchased a new care for his wife Sylvia. The new car cost $45,000 and was paid for with personal funds in cash. j. Property taxes were paid on the land and buildings in the amount of $17,000 cash. k. Dividends were declared and paid in the amount of $7,200. Information available for year and adjusting entries: ● Supplies inventory was counted and it was determined the supplies inventory was still on hand at yearend of $31,900. ● Annual depreciation on the buildings is $6,000. ● Annual depreciation on the equipment is $5,500. ● Wages of $4,000 had been earned but were unpaid and unrecorded at yearend. ● Interest for six months at 9% per year on the notes payable is unpaid and unrecorded at yearend. ● Income taxes of $16,500 were unpaid and unrecorded at year end. Required: 1. Post 2020 beginning balances to T-accounts. Prepare journal entries for transactions 1 to 11 above as required and post the journal entries to T-accounts adding any new accounts that you need. 2. Prepare necessary adjusting journal entries and post the adjusting journal entries to the Taccounts adding any new T accounts that you need. 3. Prepare a single step income statement for the year ended December 31, 2020. 4. Prepare a statement of retained earnings for the year ended December 31, 2020. 5. Prepare a classified statement of financial position at December 31, 2020. 6. Prepare closing journal entries for the year ended December 31, 2020.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Hardform Mold Shop Inc. is a company specialized in designing and building molds for the
automotive and aircraft industries. The account balances in the company’s general ledger on
January 1, 2020 (first day of the annual fiscal year) were as follows (all account balances are in
their normal position):
Cash $ 3,700
Supplies inventory 29,300
Land 168,500
Buildings 116,500
Equipment 58,500
Accumulated depreciation, equipment 18,000
Accounts payable 25,200
Income tax payable 16,600
Interest payable 4,200
Wages payable (due in 2020) 15,700
Notes payable ($10,000 due June 30, 2021, balance due June 30, 2022) 61,500
Common shares 151,500
Transactions during 2020:
a. The company provided mold design services, all on credit, for $210,300. In addition, the
company manufactured molds for customers for $62,300 cash.
b. Accounts receivable of $15,600 remain to be collected at December 31, 2020.
c. Inventory of $62,900 was purchased on credit and debited to the supplies inventory account.
d. Minor parts were purchased for $7,400 cash and debited to the supplies inventory account.
e. Wages payable at the beginning of 2020 were paid early in 2020. Wages were earned by
employees and paid during 2020 in the amount of $112,000.
f. Income tax payable at the beginning of 2020 were paid early in 2020.
g. Payments of $73,000 were made to creditors for supplies previously purchased on credit.
h. One year’s interest at 9% was paid on the notes payable at July 1, 2020.
i. During 2020, James Wilkinson, the principal shareholder, purchased a new care for his wife
Sylvia. The new car cost $45,000 and was paid for with personal funds in cash.
j. Property taxes were paid on the land and buildings in the amount of $17,000 cash.
k. Dividends were declared and paid in the amount of $7,200.
Information available for year and
● Supplies inventory was counted and it was determined the supplies inventory was still on hand
at yearend of $31,900.
● Annual depreciation on the buildings is $6,000.
● Annual depreciation on the equipment is $5,500.
● Wages of $4,000 had been earned but were unpaid and unrecorded at yearend.
● Interest for six months at 9% per year on the notes payable is unpaid and unrecorded at
yearend.
● Income taxes of $16,500 were unpaid and unrecorded at year end.
Required:
1. Post 2020 beginning balances to T-accounts. Prepare journal entries for transactions 1 to 11
above as required and post the journal entries to T-accounts adding any new accounts that you
need.
2. Prepare necessary adjusting journal
3. Prepare a single step income statement for the year ended December 31, 2020.
4. Prepare a statement of retained earnings for the year ended December 31, 2020.
5. Prepare a classified
6. Prepare closing journal entries for the year ended December 31, 2020.
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